Understanding Zimbabwe’s domestic minimum top-up tax framework

MAXWELL NGORIMA

Zimbabwe introduced the DMTT as part of its response to evolving international tax rules aimed at ensuring that large multinational groups pay a 15 % minimum level of tax in the jurisdictions in which they earn income.

The measure reflects a policy choice to protect the Zimbabwean tax base by allowing Zimbabwe to collect a top-up tax where the effective taxation of qualifying income linked to Zimbabwe falls below the prescribed minimum threshold.

In practical terms, the DMTT is intended to prevent situations in which profits connected to Zimbabwe are subject to low or no corporate taxation because of foreign tax rules, incentives, treaty outcomes or group structure.

Legal basis of the DMTT in Zimbabwe

The legal foundation of the DMTT in Zimbabwe is found in section 12B of the Income Tax Act [Chapter 23:06], read together with the 40th Schedule to that Act. The updated text of the [Income Tax Act [Chapter 23:06]]() shows section 12B listed specifically as “Domestic Minimum Top-Up Tax.” Section 12B establishes the charging mechanism and core principles of the tax, while the 40th Schedule provides the detailed rules necessary for administration, interpretation, computation and application. Together, these provisions create a self-contained minimum tax regime directed at ensuring a minimum level of corporate taxation on covered income connected to Zimbabwe.

The DMTT was introduced in Zimbabwe to align domestic law with the emerging Pillar Two minimum tax architecture. The broader international framework is reflected in the [OECD Global Anti-Base Erosion Model Rules](), which aim to ensure that large multinational enterprise groups are subject to a minimum effective tax rate of 15 percent in each jurisdiction in which they operate.

Policy context and purpose

The DMTT is rooted in the OECD/G20 Pillar Two framework, which seeks to ensure that large multinational groups with a global turnover of Euro 750 million pay a minimum effective tax rate of 15 percent in each jurisdiction.

In this context, Zimbabwe’s DMTT allows Zimbabwe to collect any top-up tax due on low-taxed Zimbabwe-linked income rather than leaving that taxing right to another jurisdiction.

· Protects Zimbabwe’s tax base by ensuring Zimbabwe-linked income bears at least the minimum level of tax.

· Promotes fairness by reducing advantages from cross-border structures that produce low effective tax outcomes.

· Aligns Zimbabwe with international tax developments and strengthens the credibility of the domestic tax system.

· Ensures profits economically connected to Zimbabwe make a minimum contribution to the fiscus.

Scope and application of Section 12B

Section 12B applies to foreign entities deriving Zimbabwe-source income where that income is either not subject to corporate tax or is taxed below an effective rate of 15 percent in the jurisdiction of residence.

Where the effective tax rate on Zimbabwe-source income falls below 15 percent, Zimbabwe imposes a top-up tax to bring the overall tax burden to the minimum level. The DMTT therefore operates as a supplementary tax rather than a tax on gross receipts.

The DMTT may apply even where a double taxation agreement would otherwise reduce or eliminate Zimbabwean tax, which strengthens its anti-base erosion function but also raises treaty and interpretive questions.

For example, a foreign entity may benefit from a corporate tax holiday in Zimbabwe, but it may still be liable for an additional top-up tax under section 12B.

Computation framework under Section 12B and the 40th Schedule

The DMTT is computed by determining the effective rate of corporate tax borne on Zimbabwe-source income and imposing a top-up tax where that rate is below 15 percent. Section 12B places responsibility on the taxpayer to calculate that effective rate using the statutory formula.

The 40th Schedule gives practical effect to section 12B by setting out the detailed rules needed to administer the tax, including definitions, computational guidance, procedures and compliance requirements.

In summary, the computation involves identifying Zimbabwe-source income, determining the foreign tax borne on that income, calculating the effective tax rate, and collecting a top-up tax in Zimbabwe where the rate is below 15 percent.

Administrative and compliance framework

The effectiveness of the DMTT depends not only on the charging provision but also on compliance and administration. A taxpayer subject to section 12B must be able to demonstrate the quantum and source of the income concerned, the foreign taxes borne, the basis on which the effective rate was calculated, and the resulting top-up tax, if any. This implies a significant record-keeping burden, particularly where groups operate through multiple entities and across several jurisdictions. The role of the 40th Schedule is likely to be especially important in clarifying these obligations, including return filing, supporting documentation, assessments, recovery and penalties for non-compliance.

From a practical perspective, administration of the DMTT requires coordination between domestic tax principles and foreign tax information.

Key interpretive and practical Issues

A key issue is whether Zimbabwe’s DMTT is intended to function as a fully OECD-aligned qualifying domestic minimum top-up tax or as a domestic minimum tax with features inspired by Pillar Two but tailored to local legislative policy. This distinction matters because alignment with international standards can affect how foreign jurisdictions treat the Zimbabwean tax for credit, ordering and safe harbour purposes. The [OECD]() and other analyses of qualifying domestic minimum taxes emphasize that consistency of design, computation and administration is central to international recognition of a domestic minimum top-up tax.

Conclusion

Zimbabwe’s introduction of the DMTT through section 12B and the 40th Schedule to the Income Tax Act [Chapter 23:06] marks an important development in the country’s international tax framework.

For the year ended 31 December 2026, multinational corporations are expected to submit to ZIMRA a DMTT tax return by the due date of 30th April 2027.

DISCLAIMER

The views and opinions expressed in this article are those of the author, Maxwell Ngorima, Tax Partner at BDO and do not necessarily reflect the official policy or position of the BDO Zimbabwe. This article is intended for informational purposes only and should not be construed as legal, tax, or financial advice. Consult mngorima @bdo.co.zw for advice tailored to your requirements.